Parliamentary Committee opposes Air India privatization, yet the Government goes ahead on its privatization course

According to news reports, the Parliamentary Standing Committee on Transport, Tourism and Culture has come out with a report strongly opposing privatization of Air India. The Committee estimates that given 5 more years, it is possible to revive Air India as a profit making company. In its final report, the Committee is expected to recommend that the government should write off the debt of Air India and stop its plans to privatize Air India.

According to the report of the Committee "it would be lopsided to assess and evaluate the functioning of Air India solely from business point of view, as has been done by the NITI Aayog". Government should review its decision to privatize or disinvest Air India and explore “an alternative to disinvestment of our national carrier which is our national pride".

The Committee found merit in the view that if Air India is withdrawn from the aviation scene, "private airlines would indulge in gouging and that (will not be) in the interest of the consumers." (meaning that private airlines will be free to fleece the passengers)

The Committee notes that the Turn Around Plan (TAP) and Financial Restructuring plan was made in 2012 for a period of 10 years. It further points out that Air India has shown "an overall improvement in various parameters and every indication is that it is coming out of the red". It "strongly feels that it will not be appropriate at this stage to disinvest when Air India has started earning profit from its operations."

Further, the report of the committee says that as some of the subsidiaries of Air India such as Air India Air Transport Services Limited (AIATSL), Air India SATS Airport Services Private Limited (AISATS), Alliance Air and Air India Express were making profits, these units should not be privatized.

The Committee called for the waiver of the debt of Air India. It said the airline's debt was "due to policy directions of the Ministry of Civil Aviation.”

The Committee said in its report that privatization of Air India would result in job loss of many people.

The Committee says that "If the disinvestment of Air India and its subsidiaries is inevitable, the Committee emphatically recommends that the interests of employees should be protected." It asked the Ministries of Finance and Civil Aviation to "develop a strategic package to protect the rights and interests of officers and staff of Air India and its subsidiaries in respect of their pension, gratuity and VRS and also the wages of contractual workers engaged by government from time to time in case the disinvestment of Air India is inevitable."

The Committee held consultations with all 14 employee unions of Air India as well senior officials of Air India subsidiaries — Air India Express, Air India Engineering Services Ltd (AIESL), Air India Air Transport Services Ltd (AIATSL), Alliance Air and Hotel Corporation of India, before coming with its recommendations. All the unions had strongly opposed privatization.

Air India has a total debt of about Rs. 48,877 crore at the end of March 2017, of which about Rs. 17,360 crore were aircraft loans and Rs. 31,517 crore were working capital loans.

Air India is projected to increase its operating profit to Rs. 531 crore for 2017-18 from a provisional operating profit of Rs. 215 crore for 2016-17.

Despite the strong recommendations of the Parliamentary Committee against the privatization of Air India, the government is going ahead full steam on this course.

Minister of state for aviation Jayant Sinha said in an interview with Bloomberg on January 15, that privatization of Air India will be completed by the end of 2018. The government has decided to break the airline into four units and offer to sell at least 51% in each of them in a strategic sale.

The core Airline business comprising Air India and air India Express will be offered as one company. Alliance Air, ground handling and engineering operations will also be sold separately in the same process.

The minister announced that most of the non-core debt of Air India will be transferred to the government’s balance sheet.

According to news reports, the government will invite expression of interest from companies after Union Budget 2018.

According to reports, IndiGo, run by InterGlobe Aviation Ltd, and Tata group have shown interest in Air India’s operations. Turkey’s Celebi Aviation Holding, Bird Group, Menzies Aviation Plc and Livewel Aviation Services Pvt. Ltd have shown interest in the Air India subsidiaries.

The government has just announced that it will allow 49% FDI in Air India.

According to a former Jet Airways chief executive Steve Forte “If the suggestion to write off the debt is accepted, you will see bidders coming out of the woodwork by the dozens.”

Air India has a fleet of about 140 planes, with a 17% share of traffic on routes linking India to international destinations and about 13% share of the domestic market. Air India is part of the world’s biggest airline grouping, Star Alliance. It has prime slots at airports across the world as also land banks and buildings among its assets.

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